The Consumer Financial Protection Bureau (CFPB or Bureau) released its Notice of Proposed Rulemaking (NPRM) for debt collection. The NPRM, a 538 page document, provides a 90 day comment period.
Below are some highlights after a first pass-through of the proposed rules. In the coming days and weeks, insideARM will publish more in-depth articles about the NPRM and its likely impact on the debt collection industry.
Email and Text Messages
The NPRM provides that the bona fide error defense will apply to a debt collector’s communication with a consumer via email or text message if it maintains reasonable procedures that include certain steps. For example, a debt collector may communicate with the consumer using an email or text using:
- The email or telephone number was used by the consumer to communicate with the debt collector for purposes other than opting out of electronic communications.
- The non-work email or phone number, if the creditor or debt collector provided notice to the consumer at least 30 days prior to the first communication that the debt collector might use such email or phone number for electronic communications. This notice must include an opt out provision.
- The non-work email or phone number obtained from the creditor or a prior debt collector the creditor or prior debt collector recently used to send communications to the consumer.
- The NPRM provides specific guidance defining a work email.
Electronic communications must also include an opt-out notice that does not require a fee to opt-out.
The NRPM also contains a safe harbor for emails and text messages that reveal the debt collector’s name or other information indicating the communication relates to debt collection if the other requirements for email and text messaging are followed.
The NPRM specifically allows a debt collector to send validation notices and other required disclosures electronically, so long as it does so “in a manner that is reasonably expected to provide actual notice and in a form that the consumer may keep and later access.” A future article will feature a deeper dive into these requirements.
Call Caps: Lucky Number 7
The NPRM proposes a cap on the amount of calls a debt collector can make to a consumer regarding a specific debt. The number of attempts to reach the consumer (where no discussion is had) is limited to seven times within a consecutive seven day period. If the debt collector holds a telephone conversation with the consumer, the debt collector must wait a consecutive seven day period before contacting the consumer again. Call-backs requested by the consumer are exempt from the call limits.
Of note, these call caps are for each specific debt. If the debt collector is servicing more than one debt, it is important to have a system in place that tracks the call attempts and successful calls for each debt.
The NPRM provides extensive discussion of the requirements for the validation notice. Page 491 of the NRPM contains a model validation notice form. In addition to current requirements, the NPRM would require the validation notice to include:
- The date that the debt collector considers the end of the consumer’s protected 30-day validation period.
- If the account is for a credit card debt, the merchant brand, if any, associated with the debt, to the extent that it is available to the debt collector.
- The name of the creditor to whom the debt is owed and, if different, the name of the creditor at the “itemization date” (which is defined as either the date of last statement, charge-off date, the last payment date, or the transaction date).
- A New-York like itemization of the debt that reflects the interest, fees, payments, and credits since the itemization date.
- A link to the CFPB website for consumer protections in debt collection.
- A tear off with specific consumer responses, such as disputing the debt (and why).
Prohibition of Suits and Threats of Suit on Time-Barred Debt
The NRPM contains a brief section on time-barred debts. All it states is that debt collectors are prohibited from bringing suit or threatening legal action on time-barred debts. Noticeably, there is no mention of a time-barred debt disclosure, which is the subject of the CFPB’s current survey.
There is a lot to unravel in these rules, and the coming days will provide a clearer picture to the industry. At first blush, the call attempt limit seems alleviated by the provision of a limited content message and the ability to communicate with consumers using email and text messages. However, the requirements for electronic communications will need a deeper dive to understand their true impact. One thing not referenced is how the Telephone Consumer Protection Act (TCPA) will impact the ability to use text messages for debt collection. The answers to many questions such as these will be revealed in due time, and a great place to start the inquiries is at the CFPB’s town hall discussion tomorrow.
Finally, it's important to note is that these are not yet official rules; they are proposals, and open to comment for the next 90 days (that clock will start ticking once the NPRM is published in the Federal Register, which is expected in the coming days). A final rule is expected in the months following the close of this comment period.